Officials: Northern Beef Packers Diverted State Grant Money

SIOUX FALLS, S.D. (AP) — South Dakota officials say more than half of a $1 million state grant given to Northern Beef Packers to cover construction and equipment costs was improperly diverted to pay immigration loan monitoring fees.

Attorney General Marty Jackley says $550,000 of the 2011 check issued by the Department of Tourism was used to pay the fees for SDRC Inc., a private company contracted by the state to handle federal EB-5 investments.

The EB-5 investment-for-green-cards immigration program helped fund the failed beef plant in Aberdeen and other large projects.

Jackley's investigation also found that former economic development director Richard Benda double billed the state for two flights to China and one to Las Vegas.

Benda was found dead Oct. 22 with a shotgun wound to his abdomen. Officials ruled it a suicide.

The Governor's office released the following statement:

Last month, I announced that I had learned of alleged misconduct at the economic development office, prior to my administration, and that I had asked Attorney General Marty Jackley to investigate. At that time, I was not able to discuss fully what I had learned, or what was discovered in the investigation that followed.

After I was elected Governor in 2010, I opted not to retain Richard Benda in my administration. I made that decision because I wanted to refocus our state’s economic development efforts. I was not aware of any alleged wrongdoing at that time. I also reorganized the cabinet in a way that divided the Department of Tourism and State Development into three smaller departments. One of those departments is the Governor’s Office of Economic Development, or GOED. I appointed Pat Costello to lead that office.

Last spring, federal investigators contacted GOED and requested certain travel vouchers filed by Richard Benda during his time as a state official. I was not aware of this federal investigation until their request was received, and I still do not know the nature or extent of the federal investigation. I am aware, however, of numerous media reports indicating that there may be an ongoing federal investigation involving Northern Beef Packers and the EB-5 program.

The state promptly provided the travel vouchers to the federal investigators as requested. We also examined the vouchers ourselves, and discovered instances in which it appeared Mr. Benda had double billed the state for his travel. A procedural weakness made the double billing possible, and there is no evidence that any other state official was aware of it. I have instructed my staff to adopt changes in procedure to prevent this in the future and to seek outside guidance to identify additional weaknesses and potential safeguards.

After I learned of the double billing, I also asked Attorney General Jackley to investigate. That investigation began immediately and continued into this fall. Investigators interviewed dozens of witnesses and scrutinized thousands of documents

Richard Benda was found dead of a gunshot wound near Lake Andes on Oct. 22, 2013. Attorney General Jackley has now released the results of the autopsy and concluded his investigation into the death of Richard Benda. Late yesterday, the Attorney General submitted to me the findings of the investigation I requested. Today, I am releasing both the letter to the Attorney General requesting that investigation and the Attorney General’s findings.

In summary, the Attorney General found evidence revealing three instances of double billing and double payment. The three instances of over-payment total $5,559.80. The Attorney General's letter also discusses the redirection by Northern Beef Packers of $550,000 in Future Fund grant funds for a payment to South Dakota Regional Center for EB-5 loan monitoring in January of 2011, after Richard Benda had left state government and was an employee of SDRC. Because the EB-5 program is a federal program, federal authorities have primary authority to investigate, and theAttorney General continues to assist in that investigation.

Members of my administration were briefed in late August about the progress of the Attorney General’s investigation. Based on what was learned from that limited briefing, GOED Commissioner Costello terminated, for cause, the state’s contract with SDRC to administer the federal EB-5 program. I also directed that an independent audit and review of GOED be conducted. As I have said, I have no reason to doubt the integrity of those who work at GOED and I believe this review will demonstrate that they are worthy of the public’s confidence. That review will be made public when it is completed.

I was not able, earlier, to disclose that Richard Benda was the target of the investigation, or to discuss any specifics, because the ongoing investigation into his death was potentially intertwined with the investigation into his alleged misconduct. Now that the investigation into Mr. Benda’s death has been concluded, I believe I can now share these details with the public.

This is a sad situation. Richard Benda’s death leaves questions that may never be answered. A betrayal of the public trust can lead to a loss of that trust, and it is a tragedy if the bad actions of an individual lead us to lose confidence in the many public servants who work hard on behalf of their fellow citizens. As Governor, I am going to take this opportunity to make improvements at GOED and do what I can to ensure that it cannot happen again.

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